MONEY CLINIC | How much should I invest in order to retire comfortably at 60?

A Fin24 reader in his mid twenties wants to know the best investment or savings option to ensure a comfortable retirement. He writes:

How much money must a 25-year-old put away every month, and into what investments, to retire comfortably at the age of 60?

Khwezi Jackson, Junior Investment Consultant at 10X Investments, responds:

First, let me take a moment to salute you for making the wise decision to start thinking about retirement now. Planning for retirement is one of the most important things you can do in your 20s. For many of your peers, retirement is a far-off goal that some of them will never get around to thinking of.

A comfortable retirement means a different thing to someone earning, say, R10 000 a month and someone earning R100 000. The aim for both should be to ensure they have enough saved to draw a pension that is equivalent to at least 60% of their final salary. It is likely they will need a somewhat lower income in retirement for various reasons, including that they will no longer have work-related expenses, will hopefully have paid off their debts, any children would be financially independent, and they would no longer be making contributions to their retirement fund.

Retirement planning is simple when you start in your 20's. There is a simple formula that works for everyone regardless of what you are earning. Save 15% of your gross salary, invest in a well-diversified high equity fund (equities perform much better than cash and bonds over the long term) and ensure that you are paying low fees (fees are often the single biggest destroyer of wealth).

Time is of the essence when saving for retirement so the sooner you start the easier it is. Any form of procrastination can lead to the required level of saving becoming far too expensive. As things stand, only 6% of South Africans can retire comfortably. Do you want to be part of this 6%?

Questions may be edited for brevity and clarity.